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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary

Special Review

Minnesota Grants Administration

We have conducted a special review of state grants. During the 2000–01 biennium, Minnesota spent over $13.9 billion in state dollars through grants and aids to local governments, school districts, other governmental organizations, and non-governmental organizations. This review focused on the approximately $550 million of grants that state agencies paid to quasi-governmental and non-governmental organizations, including non-profit organizations. The special review addressed the following questions:

  • Has the state developed an adequate system for managing grants?
  • Did state agencies use appropriate methods for awarding and monitoring grants?
  • Did state agencies comply with applicable legal requirements when expending grant funds?
Key Findings:

State agencies used various practices to select grant recipients and award competitive grants. For the items tested, in all material respects, agencies complied with the applicable legal requirements for awarding grants. As a general rule, we found that state agencies have attempted to establish open and impartial processes when selecting grant recipients. However, state agencies did not always clearly specify grant objectives and work products. We noted certain instances where grant contracts were unclear or incomplete.

The state should establish general guidelines or requirements for the grant award process, especially in the areas of conflict of interest and cash management. We recommend that the departments of Administration and Finance coordinate these efforts.

State agencies did not consistently or adequately monitor grantee activity throughout the grant period. We found numerous cases where agencies did not independently verify information they obtained from grantees, did not ensure that grantees complied with grant reporting requirements, and did not verify matching funds claimed by grantees. We think the State should consider implementing standardized grantee audit requirements, which would provide a mechanism for state agencies to obtain information necessary to assess a grantee’s financial environment, as well as its compliance with individual grant requirements.

Agencies did not always comply with applicable legal requirements when expending grant funds. In some cases, agencies did not pay grantees in accordance with applicable payment terms. In addition, there were inconsistent interpretations of the period of availability for grant funds. We recommend the Department of Finance seek legislation to clarify statutory provisions regarding the availability of grant balances.

The Legislature can have a significant impact on state grants. Therefore, we asked agencies about the Legislature’s role and their responses suggest some opportunity for change. Some administrative problems could be avoided by more carefully crafted legislation. Many of these problems are unique to individual grant programs and could be resolved by more consultation between legislators and agency staff when drafting new grant legislation.